Mr. BLAIR. Sir, pet food; they bought up the Armstrong Food Co.; they bought up a soybean company, a sardine and fish-oil company, they bought up a plastic company.

Mr. BRYSON. Plastic materials? What is that? Is that what they make containers out of?

Mr. BLAIR. I presume so, for their own products. That would be a case of, perhaps, a vertical acquisition, I just do not know.

But by and large the great bulk of their mergers have been of the horizontal type, the buying up of other manufacturing firms in the field of dairy products.

The CHAIRMAN. This is all between 1940 and 1948?

Mr. BLAIR. Yes, sir.

Incidentally, there are several companies, Congressman Bryson, that were bought up in South Carolina, one in Greenville, the Greenville Ice Cream Co., in Greenville, S. C.

Mr. BRYSON. That is my home town.

Mr. BLAIR. Yes, sir.

Of all of the types of mergers that have taken place between 1940 and 1948, the horizontal mergers have been by far the most important. No less than 62 percent of all acquisitions have been of the horizontal type.

There exists a second major type of merger, the vertical acquisition, where the acquiring company either goes backward to acquire a source, say, of raw materials, or goes forward into the field of more highly fabricated and finished products or even into the distribution field.

The acquisitions of the United States Steel Corp. since 1939 provide an illustration of forward vertical acquisitions; that is, the United States Steel Co., a producer of raw materials, has been buying up, in effect, its customers, buying up companies that formerly bought steel, perhaps, from United States Steel, or from some other basic steel company, and made finished fabricated products out of the basic steel.

Since 1939 the United States Steel Corp. has bought up three steel drum companies which take flat rolled steel and fabricate it into the drums that you see hauled around on trucks in any city.

They have bought up two oil-well machinery companies, firms that make oil-well machinery.

They have bought up a wire cloth mill in Savannah, Ga., the Savannah Wire Mill Co.; the Moise Steel Co., in Milwaukee, Wis.; they have bought up the Gunnison Housing Corp., and they have bought up the Consolidated Steel Corp., which is the largest fabricator of structural steel products on the west coast, a consolidation which incidentally you gentlemen will recall was attacked by the Department of Justice under the Sherman Act but was approved by the Supreme Court.

Last year in testifying on this same bill, you gentlemen may recall that Mr. Gilbert Montague stated that there was no need for the Federal Trade Commission to have the power to prevent acquisitions and mergers because of the fact that the Department of Justice already possessed that power.

As you gentlemen know, the Department of Justice lost the Consolidated Steel case, which should make it abundantly clear that the

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Department of Justice does not possess the power claimed for it by Mr. Montague.

Mr. DENTON. Did they buy the assets or the stock?

Mr. BLAIR. They bought up the stock, sir. The Federal Trade Commission did not take any action in that case for the reason I have stated, namely, that if we took action against stock acquisition the acquiring company would then immediately absorb the assets.

You seem to be quite interested in that question, Congressman Denton, and I would be glad to cite to you, at your convenience, recent instances from the files of the Federal Trade Commission, where we have gone in and tried to effect a divestiture of stock, only to find that subsequently, upon our taking action, the acquiring firm has absorbed the assets.

The CHAIRMAN. It might be well for you to extend your remarks and put those cases into the record.

Mr. BLAIR. All right; I will be glad to put those cases into the record. (The cases referred to are as follows:)

Time and time again in cases the Commission has moved against acquisitions of stock only to find that such acquisitions were quickly followed by purchases of assets. For example, in 1945 the Commission proceeded against P. Ballantine Sons for buying the stock of an allegedly competing firm in Newark, N. J. But while hearings were in process, the counsel for the respondent announced that his firm had just acquired the assets of the other firm. Consequently, the Commission had no alternative but to dismiss the complaint.

Again, in 1946, the Commission proceeded against the Consolidated Grocers Corp. Through a number of stock acquisitions in competing corporations, that company had become the largest wholesale grocery in the country, with assets of $20,000,000 and annual sales of $100,000,000. It occupied an allegedly dominant position in the wholesale grocery trade in numerous important trade areas, including Chicago, Baltimore, and Canton, Ohio. The Commission issued its complaint in 1946, charging a violation of section 7. Again, while the case was being tried, the respondent corporation took title to the assets and dissolved the subsidiary corporations whose stock it had acquired. And, again, the Commission had no alternative but to dismiss the case, which it did in February 1947. It is this type of situation to which the Commission refers, when it states that attempting to enforce section 7 of the Clayton Act is like "chasing a vanishing will-o'-the-wisp."

Mr. BRYSON. Upon what authority did the Department of Justice proceed in the Consolidated Steel case?

Mr. BLAIR. The Sherman Act, sir. They felt that the acquisition was a violation of the Sherman Act, that the consolidation constituted a monopoly in the general field of steel and steel fabricated products on the west coast, but the Supreme Court held against them. The Supreme Court could not see sufficient competition or sufficient effect upon competition under the provisions of the Sherman Act.

I want to be sure that I have made clear the qualification that I do not know whether or not the Court would have upheld the Commission if the Clayton Act had been amended, and we had taken action of this type under that act.

But I think our chances of winning would have been much better than those of the Department of Justice under the Sherman Act.

Mr. BRYSON. It is certain that they would not uphold you had you proceeded under the Clayton Act as now construed, without this amendment.

Mr. BLAIR. Well, the case would probably never have reached the Court.

Mr. BRYSON. It would have been futile to proceed.

Mr. BLAIR. It would have been futile to proceed. We would have issued a complaint reciting a violation of section 7 of the Clayton Act. We would have had a hearing under the Clayton Act, a trial examiner would have been appointed, a trial lawyer would have been appointed, lawyers would have gone out, accountants would have gone out, economists would have gone out, to try to obtain the facts concerning the effect of this acquisition upon competition and endeavor to determine whether it substantially lessened competition and tended to create a monopoly.

On the basis of past experience, we have every reason to believe that as soon as the case was well under way, and, of course, mind you, the defendant always has his day in court-a right which should always be protected and guaranteed, and is so guaranteed under the lawbut during that time the United States Steel Co. would probably have absorbed the assets of the Consolidated Steel Co., and we would have spent, I do not know, how many months of wasted effort and how many dollars of wasted funds.

Mr. BRYSON. How does that theory of "If you can't beat, 'jine' them" apply?

Mr. BLAIR. I beg your pardon, sir?

Mr. BRYSON. You remember that expression, "If you can't beat them, 'jine' them"? "If you cannot beat them, join them."

Mr. BLAIR. I think the expression, the remark, that applies best to the situation is the one that I heard you make some time ago, Mr. Congressman, about the man who did not want all the land

Mr. BRYSON. Oh, he just wanted all the land that adjoined his land. Mr. BLAIR. Yes, sir.

This fifth chart represents another type of vertical acquisition. This time, the direction of the acquisition is not forward into the fabricating field, but rather backward toward raw materials.

The chart shows the backward vertical and other acquisitions of Safeway Stores, from 1940 to 1947.1

During this period, Safeway Stores has moved backward, and in effect, has to a considerable extent acquired its own suppliers. It has bought up 12 meat-packing companies. It has bought up 15 cheese companies, 8 butter firms; 1 bakery products company and a gelatine dessert company. It has also made a few horizontal acquisitions, but its most numerous acquisitions have consisted of the purchase of suppliers, of manufactures of products sold by Safeway.

The CHAIRMAN. I take it that is a pattern that other chain stores have followed, too?

Mr. BLAIR. To some extent, yes, sir; although I think Safeway has followed it more extensively than the other chains, although I am not sure of that point.

Thus far, I have illustrated the horizontal type of acquisition, the forward vertical, and the backward vertical type of acquisition.

There is another type, the conglomerate acquisition. In that type the business of the acquiring firm, is only distantly, if at all, related to the business of the acquired firm. In this respect it differs from the other types of acquisition where there exists some logical relationship between the business of the acquiring firm and the acquired firm.

1 The Safeway Stores has since called the subcommittee's attention to the fact that subsequent to the years covered by the chart it has divested itself of a number of companies it had previously acquired, particularly in the meat-packing industry.